For every 10,000 won in sales, South Korean companies are spending an average of 690 won on logistics. (Image courtesy of Yonhap)
SEOUL, Feb. 7 (Korea Bizwire) – A recent study has shown that for every 10,000 won in sales, South Korean companies are spending an average of 690 won on logistics.
The Korea Chamber of Commerce and Industry announced these findings on February 6, based on a survey conducted in the last quarter of last year.
The survey, which included around 1,500 manufacturing and wholesale/retail businesses nationwide, found that logistics costs accounted for 6.9% of the companies’ sales revenue in 2022.
The burden of logistics costs was found to be disproportionately higher for smaller enterprises. Companies with annual sales under 50 billion won faced logistics costs making up 7.8% of their sales, nearly double the 4.4% seen in companies with sales over 300 billion won.
This discrepancy is attributed to smaller companies’ inability to benefit from economies of scale, leading to a relatively higher proportion of logistics expenses.
Businesses with sales between 50 billion and 100 billion won spent 5.9% of their revenue on logistics, while those making between 100 billion and 300 billion won allocated 5%.
By industry, food products (10.9%) and retail (10.6%) faced the highest logistics costs, exceeding 10%. The food sector’s high logistics expenses are due to the extensive packaging requirements and the frequent need for refrigeration systems to maintain product quality.
The retail sector’s logistics costs are driven up by the significant manpower and workload required for order processing, delivery, and returns.
The demand for cold chain logistics services, which ensure the freshness of food products from the farm to the consumer without compromising temperature, has seen rapid growth recently.
The share of logistics costs related to temperature-sensitive products has significantly increased from 7.9% in 2016, when the Korea Chamber of Commerce and Industry began its survey, to 36.3% in 2022.
To reduce logistics expenses, companies have identified several strategies, including systematic management of logistics costs (37.6%), improving delivery frequency and load efficiency (31.4%), enhancing inventory management (30.8%), and advancing logistics through informatization, standardization, and automation (24.3%).
Kim Min-seok, head of the distribution and logistics policy team at the Korea Chamber of Commerce and Industry, noted that logistics costs have been rising due to factors such as the COVID-19 pandemic, the Russia-Ukraine conflict, and risks in the Middle East leading to higher oil prices and shipping rates.
He suggested that small and medium-sized enterprises could reduce logistics costs through collaborative logistics efforts and urged the government to promote policies that encourage logistics collaboration and support investments in the automation and smart technology of distribution logistics facilities.
Ashley Song (ashley@koreabizwire.com)
